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Sunday, June 26, 2022

From contactless to digital wallets: how retail is adapting to new trends | Retail reimagined

The end of last year was instructive for retailers. The months of October to December have traditionally been retail’s golden quarter, covering the shopping periods of Black Friday and Christmas. But due to the pandemic, the last two golden quarters have been like no other. As well as facing a raft of new practical issues when it came to shopping, consumers and merchants alike re-evaluated how they wanted to live, work and shop in the future.

There are valuable lessons for merchants to learn from the experience. Rob Cameron, CEO of Barclaycard Business, is ideally placed to offer insights into the consumer trends that have emerged and how they will continue to evolve.

Digital is here to stay
The biggest retail trend of the past 18 months has been the huge conversion to digital. “I’ve heard people say it moved us up five years,” says Cameron. “But it’s more than that.” In fact, according to a report by PwC, we saw “seven years of online growth in seven weeks”.

The widespread closure of physical stores – and health concerns around using those that remained open – went beyond just accelerating the growth of e-commerce by changing the behaviour of consumers who were otherwise dragging their heels with the move to digital.

“There was a set of the population who were never going to order online groceries, groups who were never going to get used to shopping online, and those who are used to using cash,” says Cameron. “But some changes that were brought about during the pandemic lasted long enough to permanently change behaviour.

“It has structurally changed how consumers will shop, made them more digitally savvy, more aware of their online options.”

Contactless payment is essential
Now more digitally savvy consumers increasingly expect a seamless experience and frictionless transactions – and retailers who are not agile enough to respond will lose out. According to a 2020 report by Barclaycard Business, 58% of UK consumers will abandon a purchase if the online checkout process is complicated, while 44% will ditch buying something if they’re not able to use their preferred payment method.

Rob Cameron
Rob Cameron, CEO of Barclaycard Business

The demand for a seamless experience when paying, and for more payment options, extends to bricks and mortar retail, too. Contactless payments – which were introduced in the UK by Barclaycard in 2007 – have soared since spring 2020, accounting for 80% of eligible consumer transactions up to the value of £45 passing through the Barclaycard payment system. But why is contactless so popular? Well, it offers faster transactions as well as being more hygienic – crucial during the height of the pandemic. As Cameron points out, tapping a card is “better than touching a physical pin pad after 50 people before you” – despite best efforts to keep card readers clean, it gives customers peace of mind.

Cameron is encouraging retailers to embrace the higher contactless payment limit of £100 that replaced the £45 limit. “It’s a great opportunity to take friction out of the purchase experience,” he says. This is especially the case in busy stores where queues can quickly build up – contactless payments are, on average, seven seconds faster compared with chip and pin and 15 seconds faster compared with cash. Imagine it from a customer’s perspective: “The faster that line moves through, the more likely you are to have a good experience and want to come back.” Speed at the checkout will often avoid shoppers going elsewhere.

Offer payment choices at checkout
Contactless is not the only payment technology that has become more important since the pandemic began. “What we’ve seen is that merchants and consumers want choice at the checkout,” says Cameron. “And open banking is one of the choices.”

Open banking offers benefits to both parties in a transaction. It’s essentially akin to a customer transferring the money directly from their current account, which provides potential savings to merchants and offers the consumer more protection than a bank transfer. “You don’t have to exchange sort code and account details,” says Cameron, and the consumer protection levels are similar to those governing payments by card. Barclaycard’s open banking system is called Barclays Bank Pay, which was designed in partnership with a group of diverse UK merchants and through customer testing – the first merchants are just starting to turn it on. Cameron explains: “There’s an element of consumer protection if a retailer becomes insolvent and does not fulfil the order.”

Understand the benefits for your business
For the merchant, the rewards for open banking are even greater. Using this system, businesses avoid card processing fees, which makes a noticeable difference to margins, particularly on big-ticket items. “In larger transaction size, there is a price advantage to the retailer,” says Cameron. “[It’s a] lower-cost payment method that offers a robust experience.”

The boom in e-commerce that was accelerated by the pandemic encouraged shrewd retailers to explore different payment choices. “Merchants have become a lot savvier. With so much business moving online, they started looking at their checkout pages and really optimising,” says Cameron. “They’re also now taking into account cost and conversion rates.”

The result is a rise in the number of retailers accepting digital wallets as a payment method. “We’ve seen Apple Pay, in particular, grow in leaps and bounds from a lower base than some of the other more established wallets,” says Cameron. “It has grown quickly because there’s no cost to retailers.

“Consumers will notice they’re increasingly being offered the option of Apple Pay or Google Pay, and that’s because retailers realise they deliver a great customer experience, and are no more expensive to them than accepting a card payment.”

Young asian man paying by credit card in a coffee shop
Contactless payments offer convenience and – importantly during the pandemic – a hygienic option. Photograph: mixetto/Getty Images

Create a bridge between online and in-store
Retailers can accept digital wallets for payments online and in-store. Finding more ways to link these spheres is “definitely a trend”, says Cameron. “That bridging is going to be really critical for smart retailers.”

Rather than treating digital and physical as separate siloes, merchants who operate in the two environments “need [solutions] for encouraging customers to remain loyal by opting for the omnichannel experience”, he continues. “Their most profitable customers will shop through both. Click and collect is a terrific way for retailers to get consumers that understand their website and web inventory to then go into the store and experience the store environment and the merchandising in the store, because they can attract different elements of spend.”

To create this bridge, retailers need data – and data is something that Barclaycard Business can provide. “Our access to data is unique in the market,” says Cameron, attributing the company’s success in the payments field to “having great technical capabilities in combination with our data to optimise transactions. We have this amazing pool of data as a result of being the largest payment processor in the country.”

Indeed, Barclaycard processes £1 in every £3 spent on cards in the UK. Meanwhile, the number of payments via Barclaycard on Black Friday last year were up by 23% between midnight and 5pm compared with the same period in 2020, and up 2.4% on 2019.

The kinds of insights that can be gleaned from these volumes are increasingly essential to give retailers the edge they need in a world where retail norms are changing so rapidly.

Find out how Barclaycard could help your business benefit from these digital trends here

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